Storage of Payment System Data

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It has been decided that:

·       All system providers shall ensure that the entire data relating to payment systems operated by them are stored in a system only in India. This data should include the full end-to-end transaction details / information collected / carried / processed as part of the message / payment instruction. Where there is a foreign leg to the transaction, the data can also be stored in the foreign country.

·       This instruction is to be complied within a period of six months and reported to the Reserve Bank by October 15, 2018.

·   System providers shall also submit the System Audit Report (SAR) duly approved by their board to RBI by Dec 31^st 2018. The audit should be conducted by CERT-IN empaneled auditors.

Based on RBI notification dated 6th April 2018. For any further clarification, please visit www.rbi.org.in ...............Poppy

Prohibition on dealing in Virtual Currencies (VCs)

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It has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs.

Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer or receipt of money in accounts relating to purchase or sale of VCs.

Regulated entities which already provide such services shall exit the relationship within three months from the date of this circular.

Based on RBI notification dated 6th April 2018. For any further clarification, please visit www.rbi.org.in ...............Poppy

Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks – Spreading of MTM losses and creation of Investment Fluctuation Reserve (IFR)

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It has been decided to grant banks the option to spread provisioning for mark to market (MTM) losses on investments held in AFS and HFT for the quarters ended December 31, 2017 and March 31, 2018. The provisioning may be spread equally over up to four quarters, commencing with the quarter in which the loss is incurred.

Banks choosing the above option shall make suitable disclosures in their notes to accounts/ quarterly results providing details of

·        the provisions for depreciation made during the quarter/year and

·        the balance required to be made in the remaining quarters.

All banks are advised to create an Investment Fluctuation Reserve (IFR) with effect from the year 2018-19, as under:

An amount not less than the lower of the following:

·        net profit on sale of investments during the year

·        net profit for the year less mandatory appropriations

shall be transferred to the IFR, until the amount is at least 2 % of the HFT and AFS portfolio, on a continuing basis. This should be achieved within a period of 3 years where feasable.

A bank may, at its discretion, draw down the balance available in IFR in excess of 2 %, for credit to the balance of profit/loss at the end of any accounting year. Where the balance in the IFR is less than 2 %, a draw down will be permitted subject to the following conditions:

·        The drawn down amount is used only for meeting the minimum CET1/Tier 1 capital requirements by way of appropriation to free reserves or reducing the balance of loss, and

·        The amount drawn down is not more than the extent, the MTM provisions made during the aforesaid year exceed the net profit on sale of investments during that year.

IFR shall be eligible for inclusion in Tier 2 capital.

Based on RBI notification dated 2^nd April 2018. For any further clarification, please visit www.rbi.org.in ...............Poppy